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Corporate Law and Contracts

Corporations

Even when you work by and for yourself you should consider incorporating or becoming an LLC (limited liability company). There are several benefits:

  • This separates your personal assets from your business assets and debts.
  • It can lessen the amount of taxes you pay.
  • It can allow you to deduct certain medical and childcare costs.
  • It may reduce your exposure for a tax audit.
  • It provides an aura of professionalism.

Consult an attorney and/or accountant for advice on what is in your best interests.

The formation of corporations is governed by Business Corporation Law (BCL) and LLCs are governed by Limited Liability Law (LLL). The primary difference between the two is taxation under the federal tax code. Consult a professional to determine which option best suits you.

Under Article 4, Section 401 of the New York BCL, indicates that to form a corporation an individual must be at least 18 years of age.

Section 402 notes the following requirements to obtain a certificate of incorporation:

Each incorporator must give his or her name and address along with his or her acknowledged signature and deliver the document to the Department of State. It must set forth the following:

  • Corporation name.
  • Purpose for the corporation. If said purpose requires regulatory consent, such consent must be obtained.
  • Name of county where located.
  • Number of shares.
  • Class of shares if more than one and details about the varying classes of shares.
  • Statement as to variations and designations within the preferred class of shares.
  • Designation of the secretary of state and information about where process can be served.
  • If there is a registered agent, name and address of such agent.
  • If the corporation has a finite duration, that must be detailed.

The certificate of incorporation may detail the limited personal liabilities of its directors.

Requirements for LLCs.

Article 2 of the LLL requires that formation an LLC needs the filing of articles of organization, which must be signed by the organizer(s) of the LLC.

The articles of organization must contain the following:

  • Name of LLC.
  • County where located.
  • If the LLC has a finite duration, dissolution date must be provided.
  • Designation of the secretary of state and information where process can be served.
  • If there is a registered agent, name and address of such agent.
  • A statement about the liabilities of specified member(s).
  • Any other provisions as determined by members.

Individuals contemplating forming a corporation or LLC are again advised to consult professional for thorough information and advice.

Filing documents can be mailed to: Department of State, Division of Corporations, 41 State Street, Albany, NY 12231 or filed in person.

Contracts:

A contract involves at least two parties or entities, an offer, an acceptance, terms and consideration. Contracts can be written or verbal and can use formal legal terminology or informal terminology, as long as it is clear what the terms are. If one side fails to live up to its commitment, there is a breach. An offer or an acceptance made under duress makes the contract invalid. A binding contract means mutual agreement without pressure. Terms can be negotiated until mutually acceptable. Either party can withdraw from the contract prior to final agreement.

Most states have laws regarding what types of contracts must be written in order to be binding. These are called Statutes of Frauds and protect the parties from frauds. Verbal contracts in these areas will likely not be honored. Laws vary from state-to-state, but in general the following require written contracts:

  • Sales of real property
  • Debt obligations
  • Contracts that take longer than one year to complete
  • Real property leases of a year or more
  • Consideration that exceeds the state's threshold
  • Contracts the outlive the parties
  • Transfer of property upon the death of one of the parties.

A breach occurs when one party fails to live up to the terms of the contract. A breach may be material or immaterial. If it is material, the other party may be entitled to compensatory damages, consequential and incidental damages, attorney fees and costs, liquidated damages, specific performance, punitive damages, rescission or reformation. Such terms may be negotiated prior to finalization of the contract. If a breach occurs and no provision is in place, there may be litigation or it may be resolved by mediation or arbitration, which may be provided at little or no cost in your area.

It is strongly advised that you consult an attorney before entering into any type of contract.

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